“It’s a big commitment.”
You’re likely to hear those words from friends and family members before you purchase a new home. A real estate transaction is, indeed, one of the biggest investments you’ll make during your lifetime — and title insurance is designed to protect that investment. So, it only makes sense that the title company’s promise to issue a title insurance policy after closing is called a title commitment.
You can expect to receive a title commitment as part of the escrow process, after the title search on your new home is complete. The title commitment includes an explanation of any terms, conditions, exclusions, requirements, and exceptions that will be in the final policy. It also identifies specific requirements that need to be addressed prior to your closing.
As a homebuyer, you’ll want to be sure to review and understand the terms of this important document, since it outlines the protection that you can expect from your title insurance. If you find discrepancies or have any questions, your attorney, real estate agent, and/or title company representative should be able to explain what each line item means, and whether any items can be changed.
Most title companies use standard forms for title commitments distributed by the American Land Title Association (ALTA). The forms are designed to ensure that both buyers and lenders are aware of any potential issues with the property’s title before the transaction is completed.
Let’s take a look at the three basic parts of a typical ALTA title commitment:
- Schedule A – The first page of the document contains basic details about the transaction. This includes the property’s legal description; the proposed policy amount of insurance; the name of the person who currently holds title; the name of the proposed insured (buyer); the effective commitment date; the sales price; and the name of the lender.
- Schedule B-I – This section lists the requirements of the policy, or a list of conditions that must be met before the title insurance policy may be issued. This may include such matters as:
- Paying off existing mortgages and liens
- Resolving outstanding judgments
- Correcting legal descriptions
- Paying off taxes
- Recording the new deed/loan documents
- Correcting errors in the title
- Schedule B-II – Lastly, this part outlines any exceptions to coverage. In other words, it specifies matters that will not be covered by the title insurance policy. Common exceptions include:
- Mineral and water rights
- Utility and access easements
- Homeowner association covenants and restrictions
- Existing deed restrictions
- Governmental regulations regarding the use of the property
As mentioned above, buyers should read the title commitment carefully, since exclusions and exceptions may be important to the use of the property you are purchasing. In some cases, an endorsement may be added to the policy to cover an exclusion. Keep in mind that you have only a short period of time according to your purchase contract to review the commitment prior to closing.
Vanguard Is Committed to a Seamless Closing Experience
At Vanguard Title Co., we recognize that buying or selling a home is complicated and involves real estate jargon that you may not be familiar with. Fortunately, we stand ready to help you navigate the ins and outs of title insurance policies, including explaining title commitments, and much more.
We’ve successfully closed thousands of real estate transactions throughout Michigan and Florida, and our team of knowledgeable title and closing specialists has nearly 30 years of experience in the areas of real estate, title insurance, mortgage, and closings. In every transaction, we strive to focus on exactly what you need, from start to finish. That’s our commitment to you.
Download a copy of the Title Commitment